The 131-year-old Anglican cathedral in Christchurch will be demolished because it has been deemed too dangerous and expensive to rebuild after earthquake damage.
Bishop Victoria Matthews said on Friday that the cost of saving the original building was prohibitive.
Speaking at a press conference in the Christchurch botanical gardens, Matthews said the Anglican diocese had needed to confront the "hard reality" that restoring or rebuilding the 19th century building would cost at least $50m (£26m) more than insurance could fund.
She said the church hoped to build "a beautiful, inspiring, safe new cathedral" in its place.
The existing cathedral, based on a design by the Victorian architect George Gilbert Scott, has been inaccessible to the public since large parts of its structure, including the steeple, collapsed in the earthquake that struck Christchurch just over a year ago, killing 185 people.
Further damage was sustained in aftershocks, and the cathedral was deconsecrated in November.
Gerry Brownlee, the government minister responsible for the Christchurch recovery, described the decision as courageous.
The Anglican church management is, however, facing a coalition of opposition. City councillor Aaron Keown, who is establishing a formal group to protect what he calls Christchurch's Eiffel Tower, said he would "fight to the death".
"I'm quite willing to jump the cordon, jump the fence and chain myself to the building when demolition day comes," he told the Guardian.
Keown said the church, faced with a dwindling congregation long before the earthquakes began, had decided to "take all the insurance money and build a big, modern, ugly cathedral". He challenged them to delegate the task of rebuilding to the city.
"They should give the people of Christchurch the chance to save it. And then we can hand it back to them," he said.
The New Zealand Historic Places Trust said the decision was a great disappointment. The trust's own consulting engineer was confident that the cathedral could be safely restored or reconstructed, Bruce Chapman, the chief executive of the trust, said in a statement.
"As with many other heritage buildings, as well as its important primary role as a place of prayer and worship for the Anglican community, it is also a place symbolic of the identity of Christchurch," he added.
Kit Miyamoto, a California-based structural engineer and expert in post-earthquake rebuilds, said the decision was ill-judged and that restoration and strengthening was both "feasible and affordable".
"I know that because we've done a thousand jobs like it," said Miyamoto, who inspected the cathedral in September last year and has recently overseen the restoration of similar structures in Haiti.
Miyamoto, whose roles include being seismic commissioner for the state of California, said the overall scale of demolition in Christchurch, where roughly half the central city structures have come down, was alarming.
"A lot of buildings have already been taken down unnecessarily," he said. "The question finally is how important the building is."